HP Initiates Much-Needed Reorganization

PALO ALTO, CALIF. – Hewlett-Packard’s decision
to merge its printing and PC groups was a necessary
move to help the company remain competitive,
industry analysts said.

HP announced the move on March 21, with CEO
Meg Whitman stating that the intention is to unify as
many of HP’s segments under one roof as possible in
order to reduce costs and increase profitability.

The new group will be called the printing and personal
systems group and will be headed by Todd
Bradley, who was executive VP for the personal systems
group. Vyomesh Joshi, executive VP of the imaging
and printing group, will retire, ending a 31-year
career at HP.

“HP’s move is the logical outcome of the increasing
commodity status of both product categories.
With large numbers of customer and product supply-
chain synergies, it makes sense to combine the
two organizations to take advantage of that and try
to leverage a tighter go-to-market connection into
increased sales opportunities,” said Steve Baker, industry
analysis VP for The NPD Group.

Melding the two groups together will be no easy
task, said Jack Narcotta of Technology Business Research
(TBR).

“TBR believes HP will encounter competitive challenges
through the consolidation in the near term,
as most organizations would when coordinating the
merger of two large divisions. We expect it will take time
to establish effective resource sharing and allocation between the units. During this time, HP will be susceptible
to competing vendors looking to capitalize
on partner relationships. It will also take time before
customers see noticeable benefits of products that
work better together,” he said.

Whitman agreed with the analysts.

Addressing company stockholders on March 21,
she said HP’s internal problems cross all the company’s
divisions, and the company’s expenses must
be brought under control.

“We need to change our fundamental processes
and get our cost structure under control. The reorganization
is a perfect example of this,” she told the
stockholders.

Whitman described HP’s financial woes as serious
enough to hinder the company’s ability to investment
in itself and she added all expenses would have to be
carefully scrutinized.

One area specifically pointed out by Whitman was
marketing.

“We spend $4 billion on marketing, and I believe
we can spend less and still do more,” she said.

Part of this move saw the company’s marketing
programs being unified last week under Marty
Homlish, executive VP and chief marketing officer.
Homlish previously held the same position with SAP,
which was purchased by HP. He was also a longtime
executive with Sony.

Whitman also mentioned that the company had
to reduce its complexity, specifically the number of
product SKUs. She pointed out how each SKU had
its own supply chain and support personnel, and said
limiting the number of SKUs will help reduce costs.